Essentials Of Business Law Chapter 20 Transfer And Discharge Of Commercial Paper McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business LawChapter 20-2 Indorsing Commercial Paper Indorsement  The holder of commercial paper signs his or her name on the back of the instrument  Transfers ownership of the instrument to another  Transferee becomes the new holder Indorser  The person who signs his or her name on it Indorsee  The person to whom the instrument is transferred Indorsement must be written for the entire amount stated in the instrument

Essentials of Business LawChapter 20-3 Types Of Indorsements Blank indorsement  The name of the payee is written by the payee on the back of a negotiable instrument Special indorsement  The payee specifies the person to whom it is to be paid Restrictive indorsement  A signature to which words have been added restricting the further indorsement of the instrument Qualified indorsement  The indorser avoids liability for payment even if the maker or drawer defaults on the instrument

Essentials of Business LawChapter 20-4 Holder In Due Course A holder in due course takes commercial paper:  In good faith and for value  Before maturity  Without actual or constructive notice of any defects in the instrument

Essentials of Business LawChapter 20-5 Holder In Due Course To be a holder in due course, the commercial paper must:  Be complete and regular on its face  Have been acquired on or before the due date  Have been acquired for a valuable consideration  Have been taken in good faith and for value

Essentials of Business LawChapter 20-6 Defenses Against Payment Of Commercial Paper Personal defense  Defense against payment of commercial paper  May be used against any party except a holder in due course  Relate to the acts or circumstances leading to the issue of the paper Real defense  Defense against payment of commercial paper  Claims the instrument was void from the beginning  May be used by the maker or drawer against any party to a paper, including a holder in due course

Essentials of Business LawChapter 20-7 Personal Defenses Lack of consideration Fraud Duress Undue influence Non-delivery of an incomplete instrument Non-delivery of a completed instrument Payment before maturity Counterclaim

Essentials of Business LawChapter 20-8 Real Defenses Forgery Material alteration Lack of intent to execute commercial paper Incapacity of the parties to contract Illegality created by law

Essentials of Business LawChapter 20-9 Presentment Tender a note to the maker and demand its payment Show a draft or check to the drawer and request its acceptance or payment Presentment may be made by:  Mail  At the place of acceptance of payment specified in the instrument Must be presented for payment during business hours on the due date  A demand instrument must be presented for payment within a reasonable time after the date of issue

Essentials of Business LawChapter Dishonor Of Commercial Paper A negotiable instrument is considered dishonored if:  Is not accepted when presented  Is not paid when presented for payment at maturity  Presentment is excused or waived and the instrument is past due and unpaid The holder of dishonored commercial paper must give notice of the dishonor immediately  Any drawer or indorser to whom such notice is not given is relieved from liability